JPMorgan facing $700m in fines over losses

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US Attorney for the Southern District of New York Preet Bharara announced charges against two former JPMorgan Chase traders in August.

By Ben Protess and Jessica Silver-GreenbergNew York Times
September 17, 2013

NEW YORK — Global authorities are preparing to levy more than $700 million in fines against JPMorgan Chase over the bank’s huge trading loss in London last year — a rebuke that comes as the nation’s largest bank is confronting an onslaught of legal woes.

The bank’s board is meeting Monday and Tuesday to approve the fines, which could be announced as soon as this week, according to people briefed on the matter. The people, who were not authorized to speak publicly about the private negotiations, cautioned that the contours of the pact could still change.

A spokesman for the bank did not immediately respond to a request for comment.

The settlement will resolve investigations from across the federal government and the globe, scrutiny that began when the bank first announced the trading losses in May. The trading losses, which have swelled to more than $6 billion, were a rare misstep for a bank that emerged from the financial crisis in far better shape than its rivals.

The looming settlement, according to the people briefed on the matter, will include fines from regulators like the Securities and Exchange Commission and the Office of the Comptroller of the Currency.

The Financial Conduct Authority, the British financial regulator, will impose its own fine. The SEC, which is focused on a breakdown in controls at the bank that allowed the trading losses to occur, is also taking the rare step of demanding that the bank admit to wrongdoing.

While each agency negotiated separately with the bank, the people said, the authorities are expected to announce the fines in concert. For JPMorgan, the fines will help close a painful chapter that included congressional hearings, the departure of senior executives, and criminal charges against the traders at the heart of the losses.

Yet it is unclear whether the settlement will afford the bank the closure it is seeking.

The Commodity Futures Trading Commission, a regulator that oversees the market in which the losses occurred, has balked at joining the broader settlement announcement, the people briefed on the matter said.

The agency has focused on whether JPMorgan, by amassing an outsize trading position so large that it distorted the market for financial contracts known as derivatives, “manipulated” that market.

By potentially striking out on its own, the commission has frustrated JPMorgan’s efforts to move beyond the trading losses, the people briefed on the matter said. Those efforts to settle were born out of a recent federal crackdown on the bank.

Aside from the investigations into the London trading loss, the bank faces inquiries from at least seven federal agencies and two European nations. The authorities have cast a wide net, examining everything from the bank’s hiring practices in China to mortgage loans it sold to investors during the financial crisis.

Although JPMorgan has struck a $410 million settlement with the government over accusations it manipulated energy costs in California and Michigan, other deals are proving more elusive.

The bank, the people briefed on the matter said, is struggling to settle with the Federal Housing Finance Agency, which has accused the bank of selling shoddy mortgage securities to Fannie Mae and Freddie Mac, the government-controlled housing finance giants. Federal prosecutors in California investigating the bank’s sale of mortgage securities are also resisting the bank’s overtures.